November 28, 2012

Cal App: Jury Determines The Amount Of Goodwill, Not Whether There Is Goodwill

In California, a property owner whose business suffers when the land is taken is entitled to goodwill under the state's eminent domain code, and has the right to have a jury determine the amount of goodwill. But who makes the call when there's a dispute about whether there's any goodwill at all?

According to the Court of Appeal in People ex rel. Dep't of Transportation v. Dry Canyon Enterprises, No. B234198 (Nov. 28, 2012), it's the judge's decision, not the jury's. According to the opinion, "no court has squarely addressed this question." Slip op. at 1. Now one has. The court based its conclusion on the language of the statute, and because "it makes no sense to hold a jury trial on the amount of goodwill lost if there was no goodwill to lose." Slip op. at 5 (emphasis original).

The court also held that the trial court had substantial evidence before it to support its conclusion that the business owner did not have any goodwill to lose. The business owner offered expert testimony but the trial court rejected the methodology as too speculative, unconventional, or unsupported, because goodwill "almost always translates into a business's profitability, " and this business was not profitable. I Slip op. at 7. The court distinguished a case in which the court concluded that it was "possible" for an unprofitable business to have goodwill, for example when a business is unprofitable because of the condemnation. But that wasn't the case here.

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